When you’re renting out a Santa Rosa rental property, you’ll be required to protect it. The investment is worth a lot of money, and if you’re not adequately insured, you could find yourself suffering from deep financial losses from which you cannot recover.
We have talked about the importance of rental insurance before, but we want to look specifically at the insurance types you need to have as a landlord. The world is always changing. Property values are changing. Threats to people and property are popping up all the time.
Be smart. Be ready.
Let’s take a look at all the insurance coverage you’ll need for your Santa Rosa rental property.
Landlord Insurance: An Overview
When we talk about landlord insurance, we’re talking about the policy that covers both your dwelling, which is the actual physical property and the liability that you take on as a landlord. Those things are included in a comprehensive landlord policy. We’ll talk about them separately in a minute.
Landlord insurance seems like the same as your homeowner insurance policy, but it’s not. Your homeowner policy will cover the dwelling, your liability, and also the personal possessions that belong to you and are kept inside the house. If a fire burns up your furniture, your homeowner insurance will cover that loss. If a fire burns up your tenant’s furniture, replacing or repairing those items will not be covered under your landlord policy.
Here’s what you can expect your landlord insurance to cover:
- Dwellings. Your investment property is protected against any perils such as fire, wind, hail, or structural collapse. Your personal property that’s inside the rental home will also be covered. Appliances, for example, would be repaired or replaced during a covered peril.
- Loss of rent. Most landlord policies include coverage for loss of rent. If there’s a covered loss that your insurance will pay for, the loss of rental income will also be reimbursed. This is protection in case your property becomes temporarily inhabitable.
- Liability. If you are liable for property damage or bodily injury to your tenants, your insurance policy will cover those costs. Medical bills will be covered as well as any lost wages in some circumstances, depending on the policy you buy.
The amount of coverage you set for each of these things will depend on a number of details. The age and size of your property, its value, and the amount you’d need to rebuild the home all factor into how much insurance you actually need.
A good insurance agent is invaluable. You’ll want to work with someone who understands investment properties. If you don’t already have a great agent, ask your Santa Rosa property manager for a referral.
You’ll need to understand what a landlord policy doesn’t cover. We’ve already talked about tenant possessions – those things will require a separate renter’s insurance policy that you should require your tenants to purchase.
In California, there’s often a risk of floods and earthquakes. Your landlord insurance policy excludes those types of losses. You would need to purchase separate insurance to protect yourself against the damage that a major flood or earthquake could cause.
Flood Insurance for Santa Rosa Rental Homes
Agencies like FEMA and the National Weather Service are often creating and updating flood maps for communities like Santa Rosa. In California, the flood risk is real, and many experts believe that climate change is only increasing the chances that areas like ours could be prone to damage that comes with fast, heavy floods.
Flood insurance is not legally required in California, but your lender might want you to buy it before they’re willing to give you a mortgage. This includes rental properties.
A lot of landlords buy flood insurance through the National Flood Insurance Program (NFIP), but there are also plans available through private insurers. The amount you spend on this type of insurance depends on a number of things, including:
- Your rental home’s location and whether you’re in a floodplain.
- Your property’s elevation.
- The age of your property.
- The building materials used to construct your home.
Most rental property owners can find a flood policy that’s at or under $1,000 per year, but deductibles can be as high as $10,000.
Water Damage and Santa Rosa Landlords
There’s flooding, and then there’s water damage.
Generally, any water damage that occurs at your home during a covered event such as a leaky pipe or a water heater that bursts will be covered by your landlord policy. Some types of water damage, however, will not be covered, and you will want to talk with your agent about buying additional endorsements to cover these potential problems.
Any water damage that’s caused by a flood would have to be covered by your flood insurance policy.
Water that backs up into your property from an outside sewer or drain may not be covered in your landlord policy, either. You can purchase an extra coverage endorsement for this specific risk. If you don’t purchase it and water comes into your home through an outside sewer or a drain, your insurance policy won’t cover the repairs required to remediate that damage.
Gradual water damage is also not included in landlord policies or flood policies. A pipe that bursts suddenly and causes damage will be covered. A water pipe that leaks over a long period of time is not going to be covered because it’s not a sudden or accidental loss. It’s an undetected problem instead, and California law does not require your insurance policy to cover it.
Earthquake Insurance for Santa Rosa Rental Homes
If there’s fire damage to your rental property that’s caused by an earthquake, your landlord policy is required to cover it.
However, other damage to your home from an earthquake is not covered by your landlord policy.
Earthquake coverage is not required, but in a state like California, it’s a good option for rental property owners.
For Santa Rosa landlords, earthquake insurance coverage can provide some security, especially if you own a building with several units. There’s always the potential for earthquake damage, and if it’s major damage, tenants will need to move out while repairs are made. No one wants to think about the worst-case scenario, of course, but what if your building is reduced to rubble?
You’ll have to rebuild, and you want to know there’s insurance in place to help you do that.
Mold Coverage and Insurance Policies
Mold is generally covered, but the mold in your rental property will have to meet these conditions:
- It must be caused by an insurable event or a covered loss.
- It must be sudden and accidental. A burst pipe that gets ignored until the mold shows up would likely not be covered. Insurance companies want to get those claims in immediately after the incident.
Mold will be a habitability issue and a safety issue, so whether it’s covered or not, see to the removal and prevention right away. Otherwise, you could be looking at liability issues.
Let’s Re-Visit Liability Coverage
We talked about liability being included in your landlord policy. The question for you is, how much is enough?
The liability insurance you buy will cover you against lawsuits for any bodily injury or property damage claims for which you are found legally responsible. This coverage should include all your legal fees and any court awards up to your policy limits.
Buy extra liability insurance if your rental property comes with a pool or a spa. Talk to your agent about whether you’ll allow tenants to have dogs that may fall into the “dangerous breed” category. We always recommend that you carry at least half a million dollars in personal liability coverage, maybe even more. When tenants become injured and you’re found to be negligent, the lawsuit numbers can get pretty outrageous.
Consider an umbrella policy. An umbrella policy protects you and your investment when the liability coverage on your landlord insurance is exhausted from a major claim or a serious lawsuit. This can be unimaginable, but you would be surprised at the claims that get paid out. If your tenant suffers injuries that will leave them unable to work, your exposure is pretty high.
Remember to require renter’s insurance. We have briefly touched on that in this blog, and we’ve talked about it in other blogs. Renter’s insurance protects you, protects your property, and most importantly – it protects your tenants. These policies are always inexpensive, and they ensure your tenant does not have to worry about paying out of pocket to replace their belongings or cover the costs of the damage they cause in your home.
Insurance is an important topic, and there’s a lot more we can tell you. If you’d like some advice that’s specific to you and your property, please contact us at Prestige Real Estate & Property Management. We manage homes in Sonoma County, including Santa Rosa, Windsor, Sebastopol, Petaluma, and Rohnert Park.
